As the countdown to Christmas intensifies, landlords are bracing themselves for rent arrears.
The festive season often sees people spending a lot more, and, like all of us, tenants can struggle to balance their budget, meaning that December and January are peak times for rental arrears.
However, it is increasingly seeming that one or two months is not the “norm” and that landlords should prepare for increased void periods.
Due to the stamp duty hike threshold in March 2016, many landlords brought forward their plans to increase their portfolio to avoid the 3% surcharge, meaning that there was an artificially increased supply of rental stock. The market has yet to return to normal supply/demand balance in some areas of the country, meaning that voids are more of a risk.
There also seems to be a marked difference between the time taken to acquire a new tenant, but once a property was up and running, the chance of voids diminished. This makes new landlords particularly vulnerable when starting out, as they naturally want to start generating income as soon as possible.
The latest research for the Nottingham Building Society has found that more than one in five landlords have to wait longer than four months before signing up their first tenants.
Its study among landlords across the country shows 21% said they had to wait four months or more after completing their buy-to-let mortgage before they had their first paying tenants.
The Nottingham’s research found 53% of landlords have paying tenants within a couple of months of buying their first buy-to-let through lenders across the UK but substantial numbers are facing delays which pile the pressure on their finances.
Costs involved in setting up as a landlord on top of mortgage finance are not trivial – the average landlord has to pay out £2,000 on their first property before they find tenants although one in three (35%) manage to spend less than £1,000, the study shows.
Around 62% of those questioned said they had to redecorate or refurbish properties before letting them out with 28% saying redecorating work took two weeks or more.
However, once tenants are in the pressure eases substantially – on average in the past year landlords only had one month where they had no tenants – so-called voids – while 45% of those questioned say they’ve had no void months in the past year.
The Nottingham believes the research highlights the need for expert support and advice throughout the process of applying for a buy-to-let mortgage and letting out the property.
Eric Walker, M.D. of Northwood said:
“No matter what the time of the year, landlords have to be very clear on their numbers. Even a one month void period can seriously impact their profitability, as the landlord becomes liable for council tax, standing utilities, and may have their insurance premium increased.
Northwood’s Guaranteed Rent service was designed to give landlords complete peace of mind. It is currently the choice of nearly 20,000 landlords across the country who like the certainty it provides. In some cases, we can even give instant guaranteed rent, before a tenant is found.
It is well worth landlords considering the numbers as they may find Guaranteed Rent stacks up for them and our 85+ offices across the country are always pleased to assist with the number crunching and see if it is the right option for the landlord”.
So, if you are concerned about rental arrears now or in the future, consider our Guaranteed Rent service for complete landlord peace of mind!
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